Developing the Management Team
Entrepreneur
should develop the competent management team to operate the business because it
is significant to potential investors. Investors will usually demand that the
management team not attempt to operate the business as a sideline or part-time
venture while employed full time elsewhere. It is expected that the management
team be prepared to operate the business full time and at a modest salary. It
is unacceptable for the entrepreneurs to try to draw a large salary out of the
new venture, and investors may perceive any attempt to do so as a lack of
psychological commitment to the business.
Legal Form of Business
There are
three basic legal forms of business. Such as follows:
1. Proprietorship: Form of
business with single owner who has unlimited liability, control all decisions,
and receives all profits.
2. Partnership: Two or
more individuals having unlimited liability who have pooled resources to own a
business.
3. Corporation: Separate
legal entity that is run by stockholders having limited liability.
These three
basic legal forms of business are compared with regard to the following:
Ownership
Liability
Start-up
costs
Continuity
Transferability
of interest
Capital
requirements
Management
control
Distribution
of profits
Attractiveness
for raising capital
Tax attribute of form of business
- Taxable year
- Distribution
of profits to owners
- Organization
costs
- Dividend
received
- Capital
gains
- Capital
losses
- Initial
Organization
- Limitations on losses deductible
by owners
- Medical benefits
- Retirement benefits
Designing the organization
Organization
structure
Planning,
measurement, and evaluation schemes
Rewards
Selection
criteria
Training
Figure: Stages in Organizational
Design
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